Taxpayer’s Legislative Agenda 2013

www.afpnebraska.com   Spending
The Unicameral has not yet set (in  billions)   a biennial budget for 2013-15. 4   3.5   However, the Appropriations 3   2.5   Committee has released a 2   1.5   preliminary budget document 1   0.5   that provides insight into what 0   the final budget document may look like. In fiscal year 2013/2014 state spending is projected to grow by 4.8% over the previous year and by FY 2014/15 spending will have grown another 4.8%.

State  Spending  

Remarkably, a 4.8% annual increase in spending is significantly lower than the presession estimate of 6.7% in FY13/14 and is slightly lower than the Governor’s recommendation of 5.1%. However, the Governor’s recommendation for FY14/15 is lower than the Appropriations Committee’s preliminary 4.8% increase. Thus, the Appropriations Committee’s biennial budget remains comparable in its level of spending as the Governor’s recommended budget, yet still remains smaller than the pre-session biennial estimate. In sum, state spending is growing at an alarming rate. In the current year Nebraska’s General Fund is $3.6 billion. By next year spending will increase to $3.8 billion and in four years state spending is projected to grow to $4.4 billion, a 21% increase over current spending rates. By comparison, the current rate of inflation is 2% and the ten-year average inflation rate is 2.47%. The increase in state spending is significantly outpacing inflation, as well as population growth. The Nebraska Department of Economic Development projects our state population to grow by less than 0.8% by the end of the decade. State government spending, in order to keep pace with inflation and population growth, would still be significantly less than annual increases of 4.8%. Nebraska state government is simply spending too much, too quickly.

1992-­‐1993   1993-­‐1994   1994-­‐1995   1995-­‐1996   1996-­‐1997   1997-­‐1998   1998-­‐1999   1999-­‐2000   2000-­‐2001   2001-­‐2002   2002-­‐2003   2003-­‐2004   2004-­‐2005   2005-­‐2006   2006-­‐2007   2007-­‐2008   2008-­‐2009   2009-­‐2010   2010-­‐2011   2011-­‐2012   2012-­‐2013  

A-Bills and Prioritized Legislation
Appropriations bills (A-Bills) are any piece of legislation that will require additional spending to implement. During last year’s short session, twenty-six A-Bills were introduced with a cost of $11,210,986. This year we do not yet have a full listing of all A-Bills, but of the 79 legislative bills prioritized by either a state senator or legislative committee the total General Fund cost in FY13/14 is $74.5 million. For example, LB 366 prioritized by Sen. Cook would duplicate programs already offered by federal, state and local governments and provide adult GED programs at a cost of over $2 million annually. And LB 553, prioritized by the Retirement Committee, would increase the state’s contribution rate to government pensions and cost taxpayers $16.8 million annually.

Taxes
Support LB 613 – Select File One of AFP-Nebraska’s top priorities this legislative session was passing the Governor’s tax reform package (Sen. McCoy’s LB 405). The package included three components: eliminate the individual state income tax, eliminate the corporate income tax and widen the sales tax base. AFP-Nebraska testified in support of this plan and we continue to be a strong proponent of tax reform. We also readily admitted that LB 405, as introduced, would need to be significantly amended in order to be the best tax policy. Instead of amending LB 405 the Revenue Committee, at the request of the bill’s sponsor and the Governor, killed LB 405 and turned its focus to LB 613. This legislation creates a tax modernization committee that will evaluate Nebraska’s current tax code, and with the help of public input during the interim, will make recommendations for tax reform during the 2014 legislative session. AFP-Nebraska will continue advocating for either eliminating or greatly reducing our state income tax burden. States with low to non-existent personal and corporate income tax burdens consistently out-perform states, like Nebraska, with a high tax burden.

State-Local Tax Burdens, All States Local Per Rank Capita Taxes (1 is State Rate highest) Paid United States 9.8% – $4,160 Alabama 8.5% 40 $2,967 Alaska 6.3% 50 $2,973 Arizona 8.7% 38 $3,140 Arkansas 9.9% 14 $3,281 California 10.6% 6 $4,910 Colorado 8.6% 39 $4,011 Connecticut 12.0% 3 $7,256 Delaware 9.6% 23 $4,091 Florida 9.2% 31 $3,897 Georgia 9.1% 32 $3,350 Hawaii 9.6% 22 $4,399 Idaho 9.4% 28 $3,276 Illinois 10.0% 13 $4,596 Indiana 9.5% 25 $3,396 Iowa 9.5% 24 $3,688 Kansas 9.7% 19 $3,911 Kentucky 9.3% 30 $3,059 Louisiana 8.2% 42 $3,037 Maine 10.1% 9 $3,832 Maryland 10.0% 12 $5,218 Massachusetts 10.0% 11 $5,316 Michigan 9.7% 21 $3,565 Minnesota 10.3% 7 $4,651 Mississippi 8.7% 36 $2,678 Missouri 9.0% 34 $3,425 Montana 8.7% 35 $3,216 Nebraska 9.8% 15 $3,960 Nevada 7.5% 49 $3,311 New 8.0% 44 $3,765 Hampshire New Jersey 12.2% 1 $6,751 New Mexico 8.4% 41 $2,997 New York 12.1% 2 $6,157 North Carolina 9.8% 16 $3,583 North Dakota 9.5% 26 $3,892 Ohio 9.7% 18 $3,652 Oklahoma 8.7% 37 $3,259 Oregon 9.8% 17 $3,761 Pennsylvania 10.1% 10 $4,190 Rhode Island 10.7% 5 $4,647 South Carolina 8.1% 43 $2,742 South Dakota 7.6% 48 $3,042 Tennessee 7.6% 47 $2,752 Texas 7.9% 45 $3,197 Utah 9.7% 20 $3,349 Vermont 10.2% 8 $4,181 Virginia 9.1% 33 $4,392 Washington 9.3% 29 $4,408 West Virginia 9.4% 27 $3,034 Wisconsin 11.0% 4 $4,427 Wyoming 7.8% 46 $4,205 District of Columbia 9.6% $6,076

Per Capita Income $42,539 $34,911 $46,841 $36,228 $33,238 $46,366 $46,716 $60,310 $42,688 $42,146 $36,738 $45,725 $34,973 $46,079 $35,767 $38,688 $40,302 $32,959 $37,109 $37,835 $52,130 $53,029 $36,880 $45,220 $30,689 $37,853 $36,784 $40,349 $44,241 $46,828 $55,303 $35,780 $51,055 $36,650 $41,088 $37,600 $37,464 $38,527 $41,672 $43,372 $33,954 $40,082 $36,157 $40,498 $34,596 $41,061 $48,210 $47,361 $32,299 $40,321 $53,931 $63,492

Low tax states routinely post greater Gross State Product Growth, Population Growth, State and Local Tax Revenue Growth and Income Growth than states like Nebraska with a high tax burden. Eliminating Nebraska’s personal and corporate income tax will position our state to compete for new economic investment and good-paying jobs. Eliminating the personal income tax will also create a median increase of $1,051 for Nebraska families. Support LB 266 – Status: Revenue Committee Last year the Unicameral voted to override Gov. Heineman’s veto and allow municipalities to raise the local sales tax. This year Sen. Chambers has introduced LB 266 to undo this sales tax increase and return the top rate to 7% instead of 7.5%. According to the Tax Foundation, Nebraska has the 15th highest state and local tax burden in the nation. That is higher than all of our neighboring states. Nebraskans already pay enough to fund state and local government. The current half-cent increase costs the typical family an extra $100 annually. Nebraska needs to lower the tax burden to be more competitive with our peers and encourage families and small businesses to invest in our state. We support Sen. Chambers’ effort to repeal the sales tax hike.

Support LB 474 – Status: Revenue Committee Occupation taxes across Nebraska have become a way for local government to in effect increase the local sales tax rate. Occupation taxes have simply been lumped on top of the state and local sales tax and have been targeted to raise general fund dollars for local governments; this also is the purpose of the local option sales tax, not the occupation tax.

Sen. Krist’s LB 474 would prohibit local government from merely tacking on the occupation tax on top of the sales tax, as well as prohibit using the occupation tax as a sin tax on alcohol or tobacco. Oppose LB 104 – Status: General Fine Sen. Lathrop’s LB 104 would spend over $5 million of taxpayer money annually to fund tax incentives for green energy programs that simply do not work. Handing over taxpayer money to fund energy companies who have a questionable track record creating jobs is a bad investment for Nebraska. Green companies which received federal stimulus money and went bankrupt: • A123, received $249 million in DOE grants • Abound Solar, $400 million in stimulus loans • Beacon Power, $43 million in DOE loans • Ener1, $118.6 million in stimulus grants • Solyndra, $535 million in DOE loans Oppose LB 439 – Status: Revenue Committee This bill would increase the cigarette tax by 120% and tax on other tobacco products by 55%. Local occupation taxes, such as Omaha’s occupation tax on tobacco products would be in addition to this massive tax hike. Increasing the tobacco tax by 120% is treating smokers as a cash cow for more revenue for government to spend. Tobacco users already pay a significant tax burden. In 2012 Nebraskans paid $233 million in state and federal taxes on cigarettes. In fact of the average cost of $6.30 for a pack of cigarettes, the actual product cost is $2.84 and the government tax burden is $3.46. Roughly 55% of the cost of a pack of cigarettes is paid in taxes. Increasing that burden and singling out a group of Americans for participating in a legal activity is overkill.

Healthcare
Oppose LB 577 – Status: General File

We are opposed to Sen. Campbell’s LB 577, legislation to adopt Medicaid expansion, for the simple reason that we cannot afford it. Medicaid expansion would cost the federal government $930 billion from 2014 to 2022. It is unknown how the federal government can fund nearly $1 trillion in additional spending without gradually shifting those costs onto the states.

The cost of Medicaid expansion in Nebraska would be devastating to our state budget. Gov. Heineman estimates that Medicaid expansion would cost Nebraska as much as $766 million over 10 years. And if the federal government does reduce the Cash  Reserve  Historical  Chart    Balance  as   federal Medicaid match that number could  Beginning    Ending   %  of   go up dramatically.  Fiscal  Yr       Balance       Balance       revenues  
 FY1983-­‐84        FY1984-­‐85        FY1985-­‐86        FY1986-­‐87        FY1987-­‐88        FY1988-­‐89        FY1989-­‐90        FY1990-­‐91        FY1991-­‐92        FY1992-­‐93        FY1993-­‐94        FY1994-­‐95        FY1995-­‐96        FY1996-­‐97        FY1997-­‐98        FY1998-­‐99        FY1999-­‐00        FY2000-­‐01        FY2001-­‐02        FY2002-­‐03        FY2003-­‐04        FY2004-­‐05        FY2005-­‐06        FY2006-­‐07        FY2007-­‐08        FY2008-­‐09        FY2009-­‐10        FY2010-­‐11        FY2011-­‐12   est        FY2012-­‐13   est        FY2013-­‐14   est        FY2014-­‐15   est        0        37,046,760        35,574,209        22,302,064        23,730,085        17,684,929        50,423,929        40,037,043        31,937,043        26,937,043        17,437,043        27,750,505        20,481,804        18,189,565        40,962,684        132,583,702        145,700,124        142,159,429        170,236,099        110,066,099        59,142,545        87,028,337        177,167,720        273,616,790        516,087,791        545,545,797        578,191,863        467,201,626        37,046,760        35,574,209        22,302,064        23,730,085        17,684,929        50,423,929        40,037,043        31,937,043        26,937,043        17,437,043        27,750,505        20,481,804        18,189,565        40,962,684        132,583,702        145,700,124        142,159,429        170,236,099        110,066,099        59,142,545        87,028,337        177,167,720        273,616,790        516,087,791        545,545,797        578,191,863        467,201,626        313,201,626        4.7%        4.5%        2.7%        2.7%        1.7%        4.4%        3.5%        2.3%        1.8%        1.1%        1.7%        1.2%        1.0%        2.0%        6.3%        6.9%        5.9%        6.9%        4.7%        2.4%        3.2%        5.8%        8.2%        15.1%        15.6%        17.2%        14.6%        8.9%      

One of the key components of ObamaCare is the vast expansion of the Medicaid program, which cannot be done unless states voluntarily participate. The federal government is out in force pleading with states to cooperate by offering to fund 100% of the costs for Medicaid expansion for the first three years. After that the states will be asked to take on a percentage of the cost. While promises of federal funds for Medicaid expansion are made today, that is no guarantee of funding in the future.

In 2011 President Obama proposed $72 billion in Medicaid cuts and reducing the federal support of state Medicaid costs by  313,201,626        434,058,718        11.9%       $15 billion. In 2012 the President again  434,058,718        341,208,718        9.0%       proposed cutting $70 billion from  341,208,718        341,208,718        8.8%       Medicaid by revising the federal match to state Medicaid programs. And the White  341,208,718        341,208,718        8.5%       House 2013 budget proposes to cut $351 billion from entitlement programs over 10 years. When the federal government is forced to confront its spending problem; whether during the debt limit crisis of 2011, the fiscal cliff crisis of 2012 or the sequestration crisis of 2013 entitlement programs the Medicaid program is routinely scrutinized for cost savings.

Current entitlement spending is unsustainable and expanding the Medicaid program as allowed by President Obama’s health care law and proposed by LB 577 would only put the program at greater risk. Support LB 564- Status: Judiciary Committee President Obama’s federal health care law not only costs over $2 trillion in unfunded government spending, it violates the constitutional right to freedom of conscience. Sen. John Nelson’s LB 564, the ‘Health Care Freedom of Conscience Act’ guarantees individuals and institutions within the state of Nebraska the right to decline participation in health care functions which violate their respective consciences. The federal government does not have the right to demand individuals or institutions violate their most deeply held personal beliefs; yet multiple mandates in the Affordable Care Act, known as ObamaCare, forces participation in health care programs that violate their beliefs. Passage of the Health Care Freedom of Conscience Act is a strong protection against federal government overreach.

Education Reform
Support LB 14 – Status: Revenue Committee Sen. Krist’s LB 14 makes private and parochial education more affordable for every family without using government spending. Nebraska’s children deserve to receive the very best education. LB 14 provides significant incentives for private financial contributions to make private and parochial schools more affordable for families who choose to attend those schools. Every student deserves to go to the school of their choice and LB 14 makes that more affordable by providing tax incentives for private philanthropy for private education tuition support. Support LB 470 - Status: General File Sen. Scheer’s LB 470 provides important tools to ensure that administrative expenses in our public schools are easy to find, easy to understand and easy to track. While administrative expenses are a necessary function of operating a school district, each dollar spent outside of the classroom deserves maximum scrutiny.

There is a need for greater transparency. Consider for a moment the incredibly generous compensation packages offered to a few public school administrators in Nebraska: Salary Comparisons Superintendent of Fillmore Central Public Schools – $143,804 Superintendent of Dundy County Stratton Public Schools – $175,393 Superintendent of Lincoln Public Schools – $267,394 Superintendent of Omaha Public Schools – $306,091 Salary of Average Nebraska Teacher – $39,456 Salary of Governor of Nebraska – $105,000  
 

While administrative positions are necessary to the success of our schools; it is important the public has easy access to the financial data to ensure each dollar is well spent.   Oppose LB 512 - Status: Education Committee Sen. Scheer’s LB 512 would allow the State Board of Education to “adopt the common core standards in particular subject areas…” Common Core is a nationalized standard for K-12 curriculum. Local public schools would lose their relevancy if standardized curriculum and academic instruction are to be adopted in Nebraska. Local control is what makes our public school systems the best in the nation; Nebraska encourages local community and family involvement in our schools and in the formation of our curriculum. Nationalizing the curriculum and giving responsibility for the formation of academic instruction to bureaucrats in Washington, D.C. runs counter to the values which make Nebraska’s K-12 system one of the highest performing in the nation.

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